16. Deferred Income Tax Assets and Liabilities
Details of deferred income tax assets and liabilities as of December 31, 2016 and 2017, are as follows:
2016 | ||||||||||||
Assets | Liabilities | Net amount | ||||||||||
(In millions of Korean won) | ||||||||||||
Other provisions |
₩ | 91,201 | ₩ | — | ₩ | 91,201 | ||||||
Allowances for loan losses |
7,297 | — | 7,297 | |||||||||
Impairment losses on property and equipment |
7,920 | (359 | ) | 7,561 | ||||||||
Interest on equity index-linked deposits |
41 | — | 41 | |||||||||
Share-based payments |
13,709 | — | 13,709 | |||||||||
Provisions for guarantees |
30,569 | — | 30,569 | |||||||||
Losses(gains) from valuation on derivative financial instruments |
9,761 | (46,765 | ) | (37,004 | ) | |||||||
Present value discount |
11,358 | (6,160 | ) | 5,198 | ||||||||
Losses(gains) from fair value hedged item |
— | (14,335 | ) | (14,335 | ) | |||||||
Accrued interest |
— | (84,676 | ) | (84,676 | ) | |||||||
Deferred loan origination fees and costs |
1,247 | (158,914 | ) | (157,667 | ) | |||||||
Gains from revaluation |
803 | (286,119 | ) | (285,316 | ) | |||||||
Investments in subsidiaries and others |
12,014 | (109,925 | ) | (97,911 | ) | |||||||
Gains on valuation of security investment |
109,071 | (8,279 | ) | 100,792 | ||||||||
Defined benefit liabilities |
319,467 | — | 319,467 | |||||||||
Accrued expenses |
273,092 | — | 273,092 | |||||||||
Retirement insurance expense |
— | (283,771 | ) | (283,771 | ) | |||||||
Adjustments to the prepaid contributions |
— | (15,142 | ) | (15,142 | ) | |||||||
Derivative-linked securities |
30,102 | (42,825 | ) | (12,723 | ) | |||||||
Others |
365,616 | (195,856 | ) | 169,760 | ||||||||
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|
|
|
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|
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Sub-total |
1,283,268 | (1,253,126 | ) | 30,142 | ||||||||
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|
|
|
|
|
|||||||
Offsetting of deferred income tax assets and liabilities |
(1,149,644 | ) | 1,149,644 | — | ||||||||
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|
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|
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Total |
₩ | 133,624 | ₩ | (103,482 | ) | ₩ | 30,142 | |||||
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|
|
|
|
2017 | ||||||||||||
Assets | Liabilities | Net amount | ||||||||||
(In millions of Korean won) | ||||||||||||
Other provisions |
₩ | 115,518 | ₩ | — | ₩ | 115,518 | ||||||
Allowances for loan losses |
1,142 | — | 1,142 | |||||||||
Impairment losses on property and equipment |
36,598 | (407 | ) | 36,191 | ||||||||
Interest on equity index-linked deposits |
43 | — | 43 | |||||||||
Share-based payments |
23,238 | — | 23,238 | |||||||||
Provisions for guarantees |
24,341 | — | 24,341 | |||||||||
Losses(gains) from valuation on derivative financial instruments |
6,258 | (17,479 | ) | (11,221 | ) | |||||||
Present value discount |
25,332 | (4,498 | ) | 20,834 | ||||||||
Losses(gains) from fair value hedged item |
— | (15,698 | ) | (15,698 | ) | |||||||
Accrued interest |
243 | (111,514 | ) | (111,271 | ) | |||||||
Deferred loan origination fees and costs |
332 | (180,401 | ) | (180,069 | ) | |||||||
Advanced depreciation provision |
— | (1,703 | ) | (1,703 | ) | |||||||
Gains from revaluation |
648 | (350,801 | ) | (350,153 | ) | |||||||
Investments in subsidiaries and others |
24,834 | (103,268 | ) | (78,434 | ) | |||||||
Gains on valuation of security investment |
86,290 | (225,158 | ) | (138,868 | ) | |||||||
Defined benefit liabilities |
436,706 | — | 436,706 | |||||||||
Accrued expenses |
194,399 | — | 194,399 | |||||||||
Retirement insurance expense |
— | (369,300 | ) | (369,300 | ) | |||||||
Adjustments to the prepaid contributions |
— | (16,236 | ) | (16,236 | ) | |||||||
Derivative-linked securities |
27,992 | (5,679 | ) | 22,313 | ||||||||
Others |
321,453 | (452,303 | ) | (130,850 | ) | |||||||
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|
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Sub-total |
1,325,367 | (1,854,445 | ) | (529,078 | ) | |||||||
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|
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Offsetting of deferred income tax assets and liabilities |
(1,321,376 | ) | 1,321,376 | — | ||||||||
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|
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Total |
₩ | 3,991 | ₩ | (533,069 | ) | ₩ | (529,078 | ) | ||||
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|
|
Unrecognized deferred income tax assets
No deferred income tax assets have been recognized for the deductible temporary difference of ₩49,179 million associated with investments in subsidiaries and others as of December 31, 2017, because it is not probable that the temporary differences will be reversed in the foreseeable future.
No deferred income tax assets have been recognized for deductible temporary differences of ₩80,204 million and ₩112,030 million associated with SPE repurchase and others, respectively, as of December 31, 2017, due to the uncertainty that these will be realized in the future.
Unrecognized deferred income tax liabilities
No deferred income tax liabilities have been recognized for the taxable temporary difference of ₩28,407 million associated with investment in subsidiaries and associates as of December 31, 2017, due to the following reasons:
• | The Group is able to control the timing of the reversal of the temporary difference. |
• | It is probable that the temporary difference will not be reversed in the foreseeable future. |
No deferred income tax liabilities have been recognized as of December 31, 2017, for the taxable temporary difference of ₩65,288 million arising from the initial recognition of goodwill from the merger of Housing and Commercial Bank in 2001.
The changes in cumulative temporary differences for the years ended December 31, 2016 and 2017, are as follows:
2016 | ||||||||||||||||
Beginning | Decrease | Increase | Ending | |||||||||||||
(In millions of Korean won) | ||||||||||||||||
Deductible temporary differences |
||||||||||||||||
Losses(gains) from fair value hedged item |
₩ | 11,882 | ₩ | 11,882 | ₩ | — | ₩ | — | ||||||||
Other provisions |
449,239 | 466,913 | 398,537 | 380,863 | ||||||||||||
Allowances for loan losses |
5,079 | 26,492 | 51,567 | 30,154 | ||||||||||||
Impairment losses on property and equipment |
21,476 | 31,914 | 43,164 | 32,726 | ||||||||||||
Deferred loan origination fees and costs |
23,491 | 24,937 | 6,600 | 5,154 | ||||||||||||
Interest on equity index-linked deposits |
287 | 287 | 168 | 168 | ||||||||||||
Share-based payments |
44,922 | 39,600 | 51,328 | 56,650 | ||||||||||||
Provisions for guarantees |
157,954 | 157,954 | 126,319 | 126,319 | ||||||||||||
Gains(losses) from valuation on derivative financial instruments |
118,745 | 180,332 | 101,921 | 40,334 | ||||||||||||
Present value discount |
42,288 | 14,693 | 19,366 | 46,961 | ||||||||||||
Loss on SPE repurchase |
80,204 | — | — | 80,204 | ||||||||||||
Investments in subsidiaries and others |
821,059 | 59,354 | 49,014 | 810,719 | ||||||||||||
Gains on valuation of security investment |
298,796 | 394,580 | 543,172 | 447,388 | ||||||||||||
Defined benefit liabilities |
1,153,686 | 75,269 | 241,718 | 1,320,135 | ||||||||||||
Accrued expenses |
271,463 | 358,583 | 1,215,612 | 1,128,492 | ||||||||||||
Derivative linked securities |
3,090,264 | 3,098,449 | 132,573 | 124,388 | ||||||||||||
Others |
1,220,133 | 557,068 | 739,581 | 1,402,646 | ||||||||||||
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|
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Sub-total |
7,810,968 | ₩ | 5,498,307 | ₩ | 3,720,640 | 6,033,301 | ||||||||||
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Unrecognized deferred income tax assets: |
||||||||||||||||
Other provisions |
67 | — | ||||||||||||||
Loss on SPE repurchase |
80,204 | 80,204 | ||||||||||||||
Investments in subsidiaries and others |
797,862 | 774,259 | ||||||||||||||
Others |
170,214 | 119,334 | ||||||||||||||
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|
|
|
|||||||||||||
Total |
6,762,621 | 5,059,504 | ||||||||||||||
Tax rate (%)1 |
24.2 | 24.2 | ||||||||||||||
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|
|
|
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Total deferred income tax assets from deductible temporary differences |
₩ | 1,636,968 | ₩ | 1,283,268 | ||||||||||||
|
|
|
|
|||||||||||||
Taxable temporary differences |
||||||||||||||||
Losses(gains) from fair value hedged item |
₩ | — | ₩ | — | ₩ | (59,235 | ) | ₩ | (59,235 | ) | ||||||
Accrued interest |
(338,402 | ) | (333,121 | ) | (344,618 | ) | (349,899 | ) | ||||||||
Impairment losses on property and equipment |
(1,481 | ) | — | — | (1,481 | ) | ||||||||||
Deferred loan origination fees and costs |
(629,161 | ) | (649,107 | ) | (680,891 | ) | (660,945 | ) | ||||||||
Gains(losses) from valuation on derivative financial instruments |
(128,985 | ) | (457,371 | ) | (521,629 | ) | (193,243 | ) | ||||||||
Present value discount |
(37,741 | ) | (38,009 | ) | (25,722 | ) | (25,454 | ) | ||||||||
Goodwill |
(65,288 | ) | — | — | (65,288 | ) | ||||||||||
Gains on revaluation |
(1,136,143 | ) | (61,094 | ) | (107,261 | ) | (1,182,310 | ) | ||||||||
Investments in subsidiaries and others |
(408,490 | ) | (68,158 | ) | (46,935 | ) | (387,267 | ) | ||||||||
Gains on valuation of security investment |
(93,510 | ) | (114,227 | ) | (57,969 | ) | (37,252 | ) | ||||||||
Retirement insurance expense |
(996,448 | ) | (63,979 | ) | (238,045 | ) | (1,170,514 | ) | ||||||||
Adjustments to the prepaid contributions |
(90,653 | ) | (90,653 | ) | (62,569 | ) | (62,569 | ) | ||||||||
Derivative linked securities |
(3,222,110 | ) | (3,401,273 | ) | (356,125 | ) | (176,962 | ) | ||||||||
Others |
(426,328 | ) | (663,284 | ) | (1,031,097 | ) | (794,141 | ) | ||||||||
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|
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|
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Sub-total |
(7,574,740 | ) | ₩ | (5,940,276 | ) | ₩ | (3,532,096 | ) | (5,166,560 | ) | ||||||
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Unrecognized deferred income tax assets: |
||||||||||||||||
Goodwill |
(65,288 | ) | (65,288 | ) | ||||||||||||
Investments in subsidiaries and others |
(66,345 | ) | (17,205 | ) | ||||||||||||
Others |
(1,914 | ) | (906 | ) | ||||||||||||
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|
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Total |
(7,441,193 | ) | (5,083,161 | ) | ||||||||||||
Tax rate (%)1 |
24.2 | 24.2 | ||||||||||||||
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|
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Total deferred income tax assets from deductible temporary differences |
₩ | (1,807,838 | ) | ₩ | (1,253,126 | ) | ||||||||||
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|
|
|
1 | The rate of 24.2% has been applied for the deferred tax assets and liabilities expected to be utilized. |
2017 | ||||||||||||||||||||
Beginning | Business Combination |
Decrease | Increase | Ending | ||||||||||||||||
(In millions of Korean won) | ||||||||||||||||||||
Deductible temporary differences |
||||||||||||||||||||
Other provisions |
₩ | 380,863 | ₩ | 30,180 | ₩ | 395,138 | ₩ | 407,923 | ₩ | 423,828 | ||||||||||
Allowances for loan losses |
30,154 | — | 26,134 | 202 | 4,222 | |||||||||||||||
Impairment losses on property and equipment |
32,726 | 107,755 | 139,743 | 132,346 | 133,084 | |||||||||||||||
Deferred loan origination fees and costs |
5,154 | — | 5,154 | 1,207 | 1,207 | |||||||||||||||
Interest on equity index-linked deposits |
168 | — | 168 | 155 | 155 | |||||||||||||||
Share-based payments |
56,650 | — | 49,333 | 77,185 | 84,502 | |||||||||||||||
Provisions for guarantees |
126,319 | — | 126,319 | 88,512 | 88,512 | |||||||||||||||
Gains(losses) from valuation on derivative financial instruments |
40,334 | — | 40,334 | 22,758 | 22,758 | |||||||||||||||
Present value discount |
46,961 | — | 18,417 | 63,573 | 92,117 | |||||||||||||||
Loss on SPE repurchase |
80,204 | — | — | — | 80,204 | |||||||||||||||
Investments in subsidiaries and others |
810,719 | — | 753,918 | 76,902 | 133,703 | |||||||||||||||
Gains on valuation of security investment |
447,388 | — | 447,388 | 299,082 | 299,082 | |||||||||||||||
Defined benefit liabilities |
1,320,135 | 255,375 | 256,580 | 271,857 | 1,590,787 | |||||||||||||||
Accrued expenses |
1,128,492 | — | 1,123,713 | 701,756 | 706,535 | |||||||||||||||
Derivative linked securities |
124,388 | — | 124,388 | 101,789 | 101,789 | |||||||||||||||
Others |
1,402,646 | — | 629,002 | 501,901 | 1,275,545 | |||||||||||||||
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|
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Sub-total |
6,033,301 | 393,310 | ₩ | 4,135,729 | ₩ | 2,747,148 | 5,038,030 | |||||||||||||
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|
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Unrecognized deferred income tax assets: |
||||||||||||||||||||
Other provisions |
— | — | 2,879 | |||||||||||||||||
Loss on SPE repurchase |
80,204 | — | 80,204 | |||||||||||||||||
Investments in subsidiaries and others |
774,259 | — | 49,179 | |||||||||||||||||
Others |
119,334 | — | 112,030 | |||||||||||||||||
|
|
|
|
|
|
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Total |
5,059,504 | 393,310 | 4,793,738 | |||||||||||||||||
Tax rate (%)1 |
24.2 | 24.2 | 27.5 | |||||||||||||||||
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|
|
|
|
|
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Total deferred income tax assets from deductible temporary differences |
₩ | 1,283,268 | ₩ | 95,181 | ₩ | 1,325,367 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Taxable temporary differences |
||||||||||||||||||||
Losses(gains) from fair value hedged item |
₩ | (59,235 | ) | ₩ | — | ₩ | (59,235 | ) | ₩ | (57,083 | ) | ₩ | (57,083 | ) | ||||||
Accrued interest |
(349,899 | ) | (72,117 | ) | (377,010 | ) | (360,536 | ) | (405,542 | ) | ||||||||||
Impairment losses on property and equipment |
(1,481 | ) | — | — | — | (1,481 | ) | |||||||||||||
Deferred loan origination fees and costs |
(660,945 | ) | (15,846 | ) | (665,209 | ) | (657,081 | ) | (668,663 | ) | ||||||||||
advanced depreciation provision |
— | (6,192 | ) | — | — | (6,192 | ) | |||||||||||||
Gains(losses) from valuation on derivative financial instruments |
(193,243 | ) | — | (192,491 | ) | (61,077 | ) | (61,829 | ) | |||||||||||
Present value discount |
(25,454 | ) | (8,766 | ) | (34,220 | ) | (16,357 | ) | (16,357 | ) | ||||||||||
Goodwill |
(65,288 | ) | — | — | — | (65,288 | ) | |||||||||||||
Gains on revaluation |
(1,182,310 | ) | (99,244 | ) | (59,030 | ) | (53,117 | ) | (1,275,641 | ) | ||||||||||
Investments in subsidiaries and others |
(387,267 | ) | — | (72,284 | ) | (72,484 | ) | (387,467 | ) | |||||||||||
Gains on valuation of security investment |
(37,252 | ) | (236,137 | ) | (273,171 | ) | (764,891 | ) | (765,109 | ) | ||||||||||
Retirement insurance expense |
(1,170,514 | ) | (168,714 | ) | (200,722 | ) | (203,506 | ) | (1,342,012 | ) | ||||||||||
Adjustments to the prepaid contributions |
(62,569 | ) | — | (61,034 | ) | (57,505 | ) | (59,040 | ) | |||||||||||
Derivative linked securities |
(176,962 | ) | — | (176,962 | ) | (20,650 | ) | (20,650 | ) | |||||||||||
Others |
(794,141 | ) | (1,215,733 | ) | (429,645 | ) | (95,568 | ) | (1,675,797 | ) | ||||||||||
Sub-total |
(5,166,560 | ) | (1,822,749 | ) | ₩ | (2,601,013 | ) | ₩ | (2,419,855 | ) | (6,808,151 | ) | ||||||||
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|
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Unrecognized deferred income tax assets: |
||||||||||||||||||||
Goodwill |
(65,288 | ) | — | (65,288 | ) | |||||||||||||||
Investments in subsidiaries and others |
(17,205 | ) | (4,546 | ) | (28,407 | ) | ||||||||||||||
Others |
(906 | ) | — | (677 | ) | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total |
(5,083,161 | ) | (1,818,203 | ) | (6,713,779 | ) | ||||||||||||||
Tax rate (%)1 |
24.2 | 24.2 | 27.5 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total deferred income tax assets from deductible temporary differences |
₩ | (1,253,126 | ) | ₩ | (442,206 | ) | ₩ | (1,854,445 | ) | |||||||||||
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1 | The corporate tax rate was changed due to the amendment of corporate tax law in 2017. Accordingly, the rate of 27.5% has been applied for the deferred tax assets and liabilities expected to be utilized in periods after December 31, 2017. |